(Business Line)
Crude oil futures fell on Wednesday morning as the OECD (Organisation for Economic Cooperation and Development) lowered its global economic growth outlook for the year.
At 9.59 am on Wednesday, August Brent oil futures were at $65.44, down by 0.29 per cent, and July crude oil futures on WTI (West Texas Intermediate) were at $63.21, down by 0.32 per cent. June crude oil futures were trading at ₹5,432 on Multi Commodity Exchange (MCX) during the initial hour of trading on Wednesday against the previous close of ₹5,455, down by 0.42 per cent, and July futures were trading at ₹5,373 against the previous close of ₹5,395, down by 0.41 per cent.
Economic outlook
OECD Economic Outlook, released on Tuesday, said global GDP growth is projected to slow from 3.3 per cent in 2024 to 2.9 per cent this year and next year (based on the assumption that tariff rates as of mid-May are sustained).
The slowdown is concentrated in the US, Canada, Mexico and China, with other economies expected to see smaller downward adjustments. Growth through 2025 is expected to be especially weak, with global output rising by just 2.6 per cent over the year to the fourth quarter, and by only 1.1 per cent in the US, it said.
The report also suggested that governments need to find ways of addressing their concerns with the global trading system in a collaborative manner to avoid additional ratcheting up of retaliatory trade barriers between countries. Efforts to prevent further trade fragmentation should be coupled with reforms that strengthen the resilience of supply chains, including by encouraging firms to diversify both suppliers and buyers. Diversification would be aided by common or shared regulatory standards on key intermediate production inputs between countries, it said.
It is to be noted that the US administration’s move to impose trade tariffs on various economies has impacted the crude oil prices in the past few weeks.
In their Commodities Feed for Wednesday, Warren Patterson, Head of Commodities Strategy of ING Think, and Ewa Manthey, Commodities Strategist, said ICE Brent hit its highest level since mid-May on Tuesday, with the front-month contract trading just shy of $66 a barrel. Wildfires in Alberta, Canada, provided a boost to prices. This, at a time when the market is digesting the announced OPEC+ July supply hike. There continue to be clear signs of tightness in the spot oil market as we move closer towards the Northern hemisphere summer, they said.
On the Alberta wildfires, they said supply risks around the Alberta wildfires appear to be receding, at least for now, due to rainfall. Oil producer Canadian Natural Resources restarted production at one of its sites after halting production last week due to fires. However, this relief could be short-lived amid forecasts for drier and warmer weather towards the end of this week, they said.
Meanwhile, data compiled by the industry body American Petroleum Institute (API) showed a decline in the crude oil inventories in the US for the week ending May 30. API data showed inventories declined by 3.28 million barrels over the last week.
June natural gas futures were trading at ₹318.20 on MCX during the initial hour of trading on Wednesday against the previous close of ₹319.80, down by 0.50 per cent.
On the National Commodities and Derivatives Exchange (NCDEX), June cottonseed oilcake contracts were trading at ₹3,070 in the initial hour of trading on Wednesday against the previous close of ₹3,057, up by 0.43 per cent.
June jeera futures were trading at ₹20,150 on NCDEX in the initial hour of trading on Wednesday against the previous close of ₹20,255, down by 0.52 per cent.
